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How Much IL&FS Thinks It’s Worth

Infrastructure & Leasing Finance Services Ltd., which has triggered concerns in the bond market after multiple defaults, plans to raise funds from its shareholders at less than half the valuation assigned by bankers.

The board of the infrastructure lender approved selling shares to raise Rs 4,500 crore from existing shareholders led by the Life Insurance Corporation of India. It approved a price of Rs 150 apiece for the rights issue subject to approval at its Sept. 29 annual general meeting. That’s a 57 percent discount to the valuation of Rs 350 per share arrived at by SBI Capital Markets Ltd. for the share sale.

The steep discount comes as IL&FS missed more than five debt payments since August and faces scrutiny from the Reserve Bank of India. Credit rating agencies downgraded the company’s commercial paper to junk status. That’s triggered concerns around non-bank lenders whose stocks have fallen. IL&FS yesterday filed an application with the National Company Law Tribunal seeking relief for itself and 40 group entities from insolvency proceedings to restructure its debt. The IL&FS group has a consolidated debt of Rs 91,000 crore.

The company is looking to raise Rs 8,000 crore, of which more than half will be through the rights issue from LIC, the largest shareholder with 25.34 percent stake, and the State Bank of India that holds 6.42 percent.

SBI Caps, which is also preparing valuation reports for other group companies, declined to comment. Emailed queries to IL&FS about the valuation remained unanswered.

For the share sale, SBI Caps assigned a total value of Rs 10,745 crore to IL&FS, factoring in investments in its key listed and unlisted subsidiaries, according to the report reviewed by BloombergQuint.

The report also assigned a value of Rs 1,510 crore to various real estate investments—including Rs 1,322 crore for the company’s headquarters at Bandra Kurla Complex, Mumbai. Along with its assets and loans and advances, the company’s total enterprise value stands at more than Rs 21,600 crore.

IL&FS had external borrowings of Rs 17,203 crore, according to its audited standalone balance sheet for the year ended March.

Given the liabilities, SBI Caps’ report pegged the equity or market value of IL&FS at Rs 4,450 crore or Rs 350 per share.

The last time IL&FS raised equity was through a rights issue in January 2015, when it valued its shares at Rs 750 apiece, valuing the company at Rs 9,630 crore.